ZPC Gwanda exposure down to $1,8m

Business ReporterINTRATREK Zimbabwe, the local private firm jointly awarded the tender for the 100 megawatt Gwanda solar project, says Zimbabwe Power Company’s exposure now stands at $1,8 million, with the remainder of the works set to be completed soon.

A Parliamentary Portfolio Committee on Mines and Energy heard on Monday that out of the $5,1 million ZPC paid to Intratrek, without a bank guarantee for the $174 million 100 megawatt solar plant, only works valued $1,8 million were outstanding.

The revelation ZPC had released public funds to pay a contractor, an amount representing 3 percent of the total project cost, without the requisite bank guarantee, elicited public outcry amid concerns ZPC was exposed if Intratrek failed to deliver. The local company partnered CHiNT Electric Co of China, a $30 billion asset company with annual revenue of over $12 billion, on the Gwanda project. CHiNT has installed over 4 000MW of solar power plants in over 36 countries across the world.

Intratrek managing director Wicknell Chivayo revealed ZPC’s outstanding exposure when he appeared before the Parliamentary Portfolio Committee on Energy and Mines to explain “irregular” issues relating to manner he won the $174 million tender, grey areas on payments to his firm and progress on the project.

ZPC’s exposure, he said, would be extinguished once he submits the geo-technical survey on the 28th of February, valued at $600 000 and completes fencing the project site for $550 000, which will take three weeks and when he clears the site.

Site clearance would cost $2,3 million, which ZPC has not paid for out of the total initial works valued at $7,4 million, but it was not immediately clear how long this last stag of the pre-commencement works, before actual plant construction starts, will last. Intratrek has since agreed with ZPC to pay directly sub-contractor to expedite completion of the pre-commencement works. The arrangement was made over issues regarding the bank guarantee.

“Once the balance is paid (directly to sub-contractors) all works that are due will be completed. We did part of the work, which could not be quantified. To date ZPC’s exposure is $1,8 million, which will be covered by geo-technical survey at $650 000, fencing $550 000 and site clearance (estimated at $2,3 million.”

Out of the $5,1 million paid for the pre-commencement works, $2,1 million was for the feasibility study and the balance to other initial site works. While there was uproar over release of funds without advance payment bank guarantee, Mr Chivayo said the contract had provisions which allowed ZPC to waive the condition.

“Provisions of the contract provided that the employer can waive some of the conditions in the interest of the project,” he said.

According to Mr Chivayo, the Gwanda project has not necessarily been delayed by pre-commencement works, but the 85 percent engineering, procurement and construction funding component, which CHiNT Electric Co is still seeking from Chinese funders.

CHiNT faced hurdles securing the funding from China as Sinosure, which insures all Chinese loans to offshore borrowers stopped extending fresh loans to Zimbabwe over previous unpaid loans. The Government is working on having the issues resolved, which should open the avenue for funding for Gwanda.

This would also unlock about $1,5 billion for 600MW expansion of Hwange. The 15 percent balance, local equity contribution, would be raised locally after Finance Minister Patrick Chinamasa last year instructed CBZ Holdings to float bonds to support the power project, which he granted both prescribed asset and liquid asset status.

Mr Chivayo also told Parliament he sought help from an ex-Cabinet Minister for payment without a guarantee because the he could not pay the costs banks demanded and also to avoid delaying the project.

Mr Chivayo stood his ground amid a barrage of questions and jibes over alleged grey areas relating to the multi-million dollar tender, arguing that no corners were cut to win the tender neither did he pay anyone in shady deals to make things happen.

He however admitted that he had approached high profile people among them the previous energy minister, office of the president and Cabinet and State Procurement Board to seek their help to land the tender or get paid to implement the project.

Mr Chivayo said the assistance he sought from higher offices was based on the reasoning that he deserved to participate in the solar projects, an idea he said he had proposed to Government, and since the power situation in Zimbabwe was dire. The parliamentary committee grilled Mr Chivayo over his relationship with influential people including the former First Lady Grace Mugabe, ZPC chairperson Engineer Kazhanje, the late State Procurement Board chairman Charles Kuwaza, as well as former Energy and Power Development Ministers Samuel Undenge.

Mr Chivayo dismissed earlier claims by ZPC chairman Stanley Kazhanje that the power utility had to date paid Intratrek 7,1 million saying, instead, that he had received just about $5 million. ZPC acting MD Joshua Chirikutsi confirmed to the parliamentary committee on Monday that they had paid $5 million.

Mr Chivayo said while ZPC managing director Engineer Noah Gwariro initially declined to pay him without the guarantee, ZPC eventually played ball after the intervention of then Energy and Power Development Minister, Samuel Undenge.

He said the former energy minister had sought and obtained Cabinet approval to give the power utility the instruction to pay for the pre-commencement without the bank guarantee because of the power deficit in the country, which stood at 1 500MW. But Mr Chiyavo pointed out that there were provisions within the contract he signed with ZPC for the Gwanda solar project, which allowed the State owned power utility to waive certain conditions, especially as this related to a strategic national project.

However, the parliamentary committee chaired by Norton legislator Temba Mliswa also argued that Mr Chivayo had acted irregularly when he “influenced” the minister to direct ZPC to release the funds.

Mr Mliswa also insisted that although Mr Chivayo delivered the feasibility study report for the project, which proved viability of the plant, the contract demanded that he provides a guarantee, for the entire initial works of the project valued at $7,6 million. The Parliamentary Committee on Energy and Mines has since demanded Intratrek’s bank accounts and proforma invoices that prove that the company directed the funds from ZPC to the project. Other members suggested that ZPC should cancel the tender.

However, speaker of Parliament Advocate Jacob Mudenda recently said the role of Parliament was to provide oversight of public funds and that they could only make recommendations on issues.

Further, ZPC is also reportedly aware of the potential of damaging litigation and financial claims from the contractor for loss of business if the contract is not terminated according to agreed terms.